New regulations slow to stem rising tide of flood insurance rates

The duplex on 109 Ximeno Ave. is an example of a property that might not see insurance rates rise despite the passage of the Biggert-Waters Flood Insurance Reform Act of 2012. JOSH MORGAN , JOSH MORGAN, STAFF PHOTOGRAPHER

At a Glance

What: 109 Ximeno Ave., Long Beach. The duplex is of a property that may see insurance rates rise following the passage of the Biggert-Waters Flood Insurance Reform Act of 2012.

Built: 1944

Size: 2,792 square feet

Lot size: 3,150 square feet

There’s no shortage of confusion over the National Flood Insurance Program, but when the federal government decided to shelve some of its primary provisions until a few years down the line, many real estate professionals and homeowners living in flood zones breathed a sigh of relief.

Problem is, that relief isn’t here yet.

President Barack Obama on March 21 signed into law the Homeowner Flood Insurance Affordability Act of 2014, which repeals and modifies certain provisions of the Biggert-Waters Flood Insurance Reform Act.

Biggert-Waters was enacted in 2012 and directed the Federal Emergency Management Agency to change the way the National Flood Insurance Program is run, such as raising rates to reflect true flood risk, making the program financially stable and other changes, which included requiring elevation certificates on homes.

While many of those provisions were put on hold, the latest changes may not be implemented for some time as FEMA and other governmental organizations enact them – some believe it could take a year to roll back some of the provisions – and that the lag may impact real estate deals.

It’s already impacted real estate professionals who don’t understand why premiums haven’t dropped and things like surveyor-issued elevation certificates are no longer required, said Tim Weidenkeller, a Farmers Insurance agent who works on a number of deals in flood zone areas like Naples, Belmont Shore and the Peninsula.

To make matters more confusing, the California Association of Realtors sent out an email alert to its tens of thousands of members this week reiterating what the bill does.

“This law repeals FEMA’s authority to increase premium rates at time of sale or new flood map, and refunds the excessive premium to those who bought a property before FEMA warned them of the rate increase,” the email states. “The bill limits premium increases to 18 percent annually on newer properties and 25 percent for some older ones. Additionally, the bill adds a small assessment on policies until everyone is paying full cost for flood insurance.”

So when real estate agents read that email, they started to call their insurance agents like Weidenkeller to ask why their clients’ premiums hadn’t been reduced and why things hadn’t gone back to normal.

“This last week the panic calls started to come in,” Weidenkeller said.

Biggert-Waters had effectively tripled some of the insurance premiums Long Beach residents in flood zones were paying, according to Weidenkeller. Some homeowners living in flood zones in Long Beach were paying in the range of $1,500 annually, and with Biggert-Waters that rose to $3,000 or more, he said.

“They were reading this (email from the association) and the word on the street was ‘It’s over, back to normal,’” Weidenkeller said. “People were thinking, ‘The law was signed March 31; we’re good to go.’”

But until FEMA implements the changes, the rates will remain in effect, though anyone who purchased a home after March 21 and paid the higher rate will get a refund.

And elevation certificates from licensed land surveyors will still be required, which has been a problem – and sometimes a real estate transaction killer – in Long Beach, according to Weidenkeller.

One issue is that surveyors factor attached garages into elevations, and the city has a great many homes with attached garages. These garages are typically constructed at the lower end of the property, thus lowering entire property’s elevation and raising premiums.

Another problem these elevation certificates create for a number of Long Beach properties is that many don’t already have surveyor-issued certificates. Certificates were only required on properties that were built after 1974. Many homes, especially in flood zones like Belmont Shore, Naples and the Peninsula, were built in the 1930s, ’40s and ’50s.

“Those homes, they weren’t built with any thought of flood insurance,” Weidenkeller said.

So when one of those properties goes up for sale, an elevation certificate from a surveyor is required, because flood insurance is required. Under a typical process, a mortgage lender will wait until a transaction is in its later stages before taking care of some of these requirements, Weidenkeller said.

Certificates can take a week or longer, and if it’s at the end of a monthlong closing period, it could call for a rush job, which pushes the variable $250 to $650 a surveyor charges up to near $1,000, according to Weidenkeller.

Believe it or not, that cost can put a home out of a buyer’s price range when factored into monthly mortgage payments, Weidenkeller said.

The duplex on 109 Ximeno Ave. is an example of a property that might not see insurance rates rise despite the passage of the Biggert-Waters Flood Insurance Reform Act of 2012. JOSH MORGAN , JOSH MORGAN, STAFF PHOTOGRAPHER
Homes built before 1974, like this duplex at 109 Ximeno Ave., often don't have certificates of elevation, a requirement for flood insurance in low-lying parts of Long Beach. JOSH MORGAN, JOSH MORGAN, STAFF PHOTOGRAPHER
One of the entryways at a duplex on 109 Ximeno Ave. in Long Beach. The 3,150-square-foot property is an example of a property that may not see insurance rates rise following the passage of the National Flood Insurance Program. JOSH MORGAN , PHOTOS: JOSH MORGAN, STAFF PHOTOGRAPHER

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